NEW DELHI: Oct 19 (DHNS): The Centre on Saturday lifted control on diesel prices and hiked natural gas tariff by 46 per cent with an aim to usher in reforms in the petroleum and natural gas sector.

With this, the price of diesel will come down by Rs 3.64 per litre effective Saturday midnight in Bangalore and will cost Rs 60.43. The price move is in tandem with international prices from the next month.

Hike in natural gas prices, however, will increase fertilizer, PNG, CNG and gas-based electricity tariffs.

After deregulation, the government will no longer provide subsidy on diesel. “Henceforth, like petrol, pricing of diesel will be market determined,” Finance Minister Arun Jaitley told reporters.

There are apprehensions that if the crude prices go up in the international market, the consumers will have to pay more for the fuel.

Brent crude in international market has fallen 25 per cent this year to around $83 per barrel and expectation is that it may not cross $100 a barrel anytime soon.

This will be the first reduction in diesel rates in over five years. Diesel prices were last cut on January 29, 2009, when they were reduced by Rs 2 a litre to Rs 30.86. Rates have since climbed to Rs 58.97. Diesel will now cost Rs 55.6 per litre in Delhi from Sunday.

Gas tariff hike

Against the backdrop of the recommendation to double gas prices to $8.4 per million British thermal unit (mmBtu) by the Rangarajan Committee, which was cleared by the UPA government, the NDA government approved a 46 per cent increase.

The prices will go up from the current $4.2 per mmBtu to $5.61 per mmBtu from November 1 and rates will be revised every six months with the next revision being on April 1.

Rates for the gas produced by Mukesh Ambani’s Reliance
Industries Limited (RIL) as well as state-owned ONGC will also be revised every six months with the next review on April 1.

The hike is not applicable to RIL’s Dhirubhai-1 and 3 gas fields in the KG-D6 basin till it makes up for the shortfall in production in the past four years.

RIL will get the higher price if it is able to prove legally that the fall in output was not deliberate and was due to geological reasons as it claims.

The natural gas price increase will result in CNG prices going up by Rs 4.25 per kg and piped cooking gas by Rs 2.6. Oil Minister Dharmendra Pradhan said states are being asked to cut taxes to reduce the burden.

Besides, tariff for power produced from gas will go up by about 90 paisa per unit and fertiliser production cost by almost Rs 2,720 per tonne.

The decision will not only ease the subsidy burden on the government, but will also encourage private players like RIL and Essar Oil to resume their retail operations.